UK government moves forward with regulatory framework on stablecoins for payments

The United Kingdom's Economic and Finance Ministry has said it intends to amend its existing regulatory framework to incorporate stablecoins used as a means of payment.

In a Monday announcement, HM Treasury said certain stablecoins could potentially become “a widespread means of payment” for retail customers in the United Kingdom following a consultation with various organizations, universities and individuals that was begun in January 2021. The U.K. government body said it intended to “take the necessary legislative steps” to bring stablecoins into its regulatory framework, “primarily by amending existing electronic money and payments legislation.”

The Finance Ministry said amending its regulatory framework to include stablecoins as a means of payment was just one part of a “package of measures” aimed at incorporating crypto assets and blockchain technology into the United Kingdom. The government body also announced a Cryptoasset Engagement Group “to work more closely with the industry,” exploring how the country’s tax system could encourage development in the crypto market, establishing a "financial market infrastructure sandbox" aimed at innovative firms, and introducing a nonfungible token issued by the Royal Mint in summer 2022.

“It’s my ambition to make the U.K. a global hub for crypto-asset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country,” said Rishi Sunak, Chancellor of the Exchequer. “This is part of our plan to ensure the U.K. financial services industry is always at the forefront of technology and innovation.”

John Glen, the Economic Secretary of the Treasury, said the government will be reviewing how crypto lending might be treated in the country’s tax system, and consult to see if overseas investors could be exempt from U.K. taxes for crypto transactions conducted on their behalf under the Investment Manager Exemption. He will establish and chair the Cryptoasset Engagement Group, consulting with industry and regulatory leaders to advise the U.K. government.

The response to the consultation suggested the U.K. plans to explore regulating “a wider set of crypto-asset activities,” given the market’s growth and adoption. In addition, the country’s financial watchdog, the Financial Conduct Authority, or FCA, said it will hold a "CryptoSprint" event in May aimed at hearing from industry participants on how a regulatory framework for crypto might be further developed in the United Kingdom.

“If crypto technologies are going to be a big part of the future, then we, the U.K., want to be in — and in on the ground floor,” said Glen at the Innovate Finance Global Summit on Monday. “In this country, we’ve already said that we’ll seek to protect consumers by legislating to bring certain crypto-assets into the scope of financial promotions regulation.”

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The statement from the U.K. government came following the FCA announcing it had extended the temporary registration status of some firms offering crypto services beyond its original March 31 deadline. In addition, the Bank of England and a group of U.K. regulators said in March they were assessing crypto regulation, specifically noting they “welcomed” HM Treasury’s proposals for bringing stablecoins into the country’s regulatory framework.